The need to decentralise power systems in response to the growing influx of renewable energy generation is flavour of the week, as Canada’s provincially-owned utility Hydro One prepares to go public in the coming days, and developers seek to make their mark on Africa’s promising solar market.
Ontario is looking to raise as much as CAD 1.87bn ($1.42bn) from the sale of 15% of Hydro One, pricing shares at between CAD 19 to CAD 21 apiece, in what could be Canada’s biggest IPO in 15 years. The electricity distribution and transmission company comes to market at a time when the provincial grid system must expand in order to connect increasing wind and solar supply with demand.
Hydro One owned CAD 23.2bn worth of assets, including 29,000km (18,000 miles) of transmission lines, as of June this year. Even at CAD 19-a-share, Hydro One would have a total market value of CAD 11.3bn – ranking it among the top 20 largest utilities in North America – allowing it to make sizeable acquisitions in the distribution sector.
On the African continent, Off-Grid Electric, a Tanzania-based renewables developer, raised $25m in venture capital to install residential solar-panel systems in East Africa last week. Off-grid residential systems are often the best way to bring electricity to sparsely-populated regions of Sub-Saharan Africa, The company has been installing 10,000 systems a month in Tanzania, where it has partnered with the government to power 1m homes in the next three years.
In West Africa, “R20 Regions of Climate Action”, Arnold Schwarzenegger’s clean energy NGO, has partnered with Akuo Energy, a French renewables developer, to build a 50MW solar plant in Mali, following a 30-year concession agreement with the government. Developers of the EUR 80m ($89m) project have negotiated a long-term power purchase agreement with Energie de Mali, the state-owned utility, a “crucial step” that takes Akuo further than many of the large solar projects in sub-Saharan Africa, according to Bloomberg New Energy Finance analysts.
In South Africa, California-based SolarReserve is set to build a 100MW solar thermal plant in Northern Cape with molten salt storage, after winning $400m in federal financing from the US Overseas Private Investment.
In Uganda too, the Muzizi hydropower plant, located 6km (3.7 miles) southeast of Lake Albert offers an opportunity to international investors, as Uganda Electricity Generation invites bidders for the “pre-qualification” phase.
Many more projects like the above will come to fruition if Akinwumi Adesina has his way. The African Development Bank’s new president says he can mobilise $55bn a year to bring electricity to the poorest parts of the continent, where at least 620m people lack power access. ““Today, Africa generates $540bn in tax revenue per year,” said Adesina, “If you take 10% of that and devote it to the energy sector, the problem is solved.” The ADB will look to finance large regional projects such as the 40GW Inga Dam in Congo and the 310MW Lake Turkana wind project in Kenya, which received a power off-take agreement from Google last week.
The effects of low commodity prices and developments in policy support for renewables are explored in the H2 2015 Sub-Saharan Africa Market Outlook, published by BNEF.
In the Middle East, Qatar has set a target to produce 200MW of solar energy by 2020, and 500MW by 2025, according to Fahad Al-Mohannadi, managing director of Qatar Electricity & Water; while in Ukraine the government is offering tax breaks to foreign investors looking to play in its renewables market, potentially worth $18bn, in order to reduce the Eastern European country’s dependence on Russian gas.
In the US, the subject of distribution networks has returned to the table as the American Wind Energy Association announced that 3.6GW of wind power capacity was installed in the first nine months of 2015 – almost triple that of 2014.The growth was driven partly by corporates such as Amazon, Microsoft and Wal-Mart investing in wind projects.
In California, the surge in solar power installation will test the state-wide electricity grid this winter, as alternative sources of energy are called upon to replace the solar generation lost when the sun goes down. To tackle this situation, the California Legislature has mandated that the state’s three largest utilities procure 1,325MW of energy storage by 2020 – explored in the BNEF market update, California dreaming: energy storage. “Market rules are being developed to ensure that the value of storage is optimised on the grid. This could see energy storage used for grid balancing and revamping,” the note says.
Finally, in UK news, Octopus Investments received GBP 400m ($614m) from a syndicate of banks to invest in 74 operating solar projects owned by funds that it manages, while Terra Firma Capital Partners announced it would repurchase shares from minority holders in Infinis Energy two years after listing the company. The renewable energy owner has seen its shares tumble this year on the back of withdrawal of subsidy support for all new onshore wind projects.
The UK also hosted President Xi Jinping of China last week, during which some $26bn of energy deals were signed. Of note, China General Nuclear Power agreed to take a 33.5% stake in the GBP 18bn ($28bn) Hinkley Point C nuclear project, while China Three Gorges agreed to acquire 30% of the equity and shareholder loans of the 1.1GW Moray Firth offshore wind farm off the coast of Scotland. These deals and more are explored in the BNEF Analyst Reaction: China announces $26bn of energy deals on UK visit.
Source: BNEF. Reproduced with permission.